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SMM Evening Comments (Jul 1): SHFE base metals closed mostly higher on upbeat economic data
Jul 1,2020 17:39CST
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Source:SMM
Copper and aluminium extended their overnight gains to both end more than 1.6% higher, lead erased some of earlier gains to close 0.5% higher, while tin reversed an earlier slip to settle 0.3% firmer. Zinc and nickel, meanwhile, both shed more than 0.7%, failing to claw back overnight losses.

SHANGHAI, Jul 1 (SMM) – SHFE nonferrous metals closed higher for the most part on Wednesday, as better-than-expected Chinese factory activity data and the latest stimulus efforts by China’s central bank lifted market sentiment.

 

Copper and aluminium extended their overnight gains to both end more than 1.6% higher, lead erased some of earlier gains to close 0.5% higher, while tin reversed an earlier slip to settle 0.3% firmer. Zinc and nickel, meanwhile, both shed more than 0.7%, failing to claw back overnight losses.

 

On the LME, copper, aluminium and tin were in positive territory as of 17:32 Beijing time, while sharp losses in afternoon trade knocked zinc, nickel and lead into negative territory.

 

A private survey showed Chinese manufacturing activity in June growing more than expected, with the Caixin/Markit manufacturing Purchasing Manager’s Index (PMI) coming in at 51.2 last month. That was above expectations of a reading of 50.5.

 

China's central bank announced Tuesday that it would cut the re-discount and re-lending rates by 25 basis points as of July 1, in a move that will reduce funding costs for smaller firms and rural sectors.

 

In Europe, Germany’s manufacturing contraction eased in June, with the final IHS Markit PMI coming in at 45.2, exceeding a flash estimate of 44.6 and up from 36.6 in May.

 

Figures from Germany’s Federal Labour Office showed the country’s jobless total rising by 69,000 in June, slowing from the 237,000 recorded in May.

 

Wednesday looks set to be a busy day on the economic calendar, with US manufacturing activity and hiring data slated for release tonight.

 

Copper: The most-traded SHFE August contract added 1.63% to end the day at 49,350 yuan/mt, shortly after hitting a new more than five-month high of 49,380. The load-up of long positions primarily accounted for Wednesday’s gains in SHFE copper. The contract is likely to test the 49,500 mark tonight.

The latest SMM survey showed that manufacturing activity across Chinese copper downstream industries expanded for a fourth straight month in June, as the economy continued to recover after the government lifted strict lockdowns and ramped up investment.

 

Aluminium: The most-liquid SHFE August contract notched the highest since January 23 at 14,050 yuan/mt before closing up 1.67% at 14,030 yuan/mt, as longs aggressively loaded up positions while shorts covered their positions. The contract is within striking distance of the upper Bollinger band and likely to move at 13,690-14,150 tonight.

Premiums for the SHFE July contract over the August one have widened to 250 yuan/mt, pointing to tight spot availability amid falling inventories.  

 

Zinc: The influx of shorts forced the most-active SHFE August contract to give up earlier gains to a session-low of 16,660 yuan/mt, before it closed down 0.71% at 16,685. The contract reversed Tuesday’s rally as easing ore supply—as evidenced by higher TCs—and increased supply from smelters as well as the absence of a strong driver of consumption paint a bearish fundamentals picture for SHFE zinc, which is expected to remain weak and consolidate tonight.

  

Nickel: The most-traded SHFE August contract hovered in a tight range during the daytime trading session, failing to recoup overnight losses to finish the day 0.74% lower at 101,850 yuan/mt. Wednesday’s decline came after two consecutive days of gains and knocked the contract below the 40-day moving average.

 

Lead: The most active SHFE August contract retested four-month highs around 14,915 yuan/mt in morning trade, before it eased in the afternoon and closed 0.54% higher at 14,785.

 

Tin: Short-covering triggered a rally in the most-liquid SHFE August contract, helping it reverse an earlier slip from a session-low of 137,440 yuan/mt to the highest in more than a week at 139,060. The contract ended the day 0.27% higher at 138,610, and faces pressure at a previous high of 139,500.

Evening comments
Copper
Aluminium
Zinc
Nickel
Tin
Lead

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